Would a university really be allowed to go bust?

Graduation Image copyright PA
Image caption Universities depend on being able to recruit enough students and their fees

Hundreds of thousands of young people and their families are currently applying for university - going on open days and checking out shiny promises on websites.

They might have had an anxious look at Thursday's headlines, with the i newspaper warning that three unnamed universities were on the "brink of bankruptcy".

Are those thinking of committing tens of thousands of pounds to a degree course at risk of seeing it collapse?

Universities are now in a 'market' so can they go bust?

In theory, the answer is yes. The university sector in England has been created as a competitive marketplace and ministers have been quite clear that there are no guarantees for anyone.

No one has gone bust and shut down so far, but we're in a different era for higher education.

Universities are able to recruit as many students as they want - which means that some institutions have expanded rapidly, while others have struggled.

Universities are highly reliant on tuition fees, so if they can't recruit sufficient students their supply of cash is cut off, and there are multiple reports of universities getting into all kinds of complicated borrowing arrangements.

At some point, universities relying on rising debt might run out of road.

Would ministers really stand back and not intervene?

The government has to say that it would allow universities to crash - otherwise it would in effect be offering a blank cheque.

But it would be a brave education minister who would let it happen, without stepping in with emergency bailouts, merger deals, property sell-offs or new management.

Imagine the wrath of students and their parents if they had been allowed to start a course at a university, when the minister knew it was in serious financial trouble.

It would be like letting people buy a boat that you knew was likely to sink.

What would happen to people halfway through a course or graduates who had degrees from a place that no longer existed?

There would be legal challenges, campaigns by local MPs and businesses, battles over fee refunds, and accusations about why the government didn't act to prevent a collapse.

There is a deep inherent contradiction in creating a market with the risk of financial extinction, but also keeping information away from students who are being asked to invest their future.

And even if a university is business-like, is it really to be treated as a business?

Rather like a financially-challenged rail line or a utility, wouldn't it be more likely that the service would be maintained, even if the management was changed?

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What would a bankruptcy mean to other universities?

The word that's being mentioned is "contagion". A bit like a banking collapse, a university going bust would send a shockwave through the rest of the sector, threatening confidence in other institutions.

Applications to other universities might tumble, putting other places at risk and raising questions about the wider student finance system in which millions of people are borrowing and repaying.

Lenders who assumed that universities were a safe bet might get nervous and reduce the credit on which other universities are relying. Those living on a deficit would find themselves in deeper water.

The lucrative overseas student market would take a hit, threatening billions in income that subsidises other students.

How can universities claim to be poor when they're getting such high fees and having a building boom?

A government review is examining the future of tuition fees in England - which are among the highest in the world. It will be considering whether a much lower headline figure is viable.

Universities will be lobbying hard against a cut in fees and there will be some cynical views of universities claiming hardship and threatening disaster.

But the reliance on unpredictable student recruitment and a building splurge based on cheap borrowing has seen a polarising effect.

There are some universities getting richer and expanding, while others will have falling numbers and exposure to debt.

Universities will also be deeply anxious about perception. If they're seen to be financially at risk it would be a killer blow to recruitment and the perception would soon become a dangerous reality.

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